Cargill gets AWB trading assets

The Canadian fertiliser and rural services giant Agrium was last night finalising the sale of AWB’s commodities trading arm to the largest private business in the United States, Cargill, in a deal worth more than $350 million.

Agrium’s decision to carve up
AWB
comes less than a fortnight after it took control of the former mono­poly wheat exporter after a $1.2 billion cash bid.

The Agrium board, which is understood to have approved the sale at a board meeting on Friday, was last night completing the final details of the sale to Cargill, which could deliver the US group AWB’s half-share in Melbourne Port Terminals, 22 grain storage sites, rail assets and AWB’s trading desks in Australia, Geneva and India. The groups were expected to announce the sale overnight.

The Australian commodity business of AWB is valued at between $250 million and $280 million, and its international operations are worth $100 million to $120 million.

That leaves a transaction range of between $350 million and $400 million, plus any goodwill.

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The sale will bolster Cargill’s position in the Australian grains market and could have implications for eastern Australia’s biggest storage and handler,
GrainCorp
, which had its $856 million bid for AWB gazumped by Agrium.

Cargill, which turned over more than $US100 billion last year, has facilities at Newcastle’s Kooragang Island Port for its oilseeds business and is understood to be part of a consortium looking to develop grain export facilities at the port. They would pose direct competition to GrainCorp.

GrainCorp is likely to press regulators for Cargill to be forced to open up any wheat export facilities to third-party users. GrainCorp and other bulk handlers are required to open their facilities.

But the Melbourne Port Terminals, in which Cargill will gain a half share, is exempt from the Australian Competition and Consumer Commission ruling because its operator, Japan’s Sumitomo Corp, is not a licensed wheat exporter. It does, however, own half of Emerald Group, which is an accredited wheat exporter.

The third-party access under­takings are in place for exporters controlling port facilities to ensure rivals without crucial infrastructure could get grain to offshore markets.

The sale of the AWB’s commodity business ends a lengthy process of the division, which once had an iron fist on the country’s wheat exports through its single-desk status.

But since losing the monopoly in the aftermath of the oil-for-food ­scandal, AWB’s share of Australian wheat exports has sunk to about 20 per cent.

Former AWB management were in discussions for more than a year with potential buyers such as Glencore Grain, Gavilon and GrainCorp.

Gavilon has since ramped up its Australian presence, establishing an office in Perth and poaching senior staff from bulk handler CBH Group.

GrainCorp has announced plans to establish a European trading office.

Market watchers had expected Agrium, one of the world’s biggest fertiliser marketers and producers, to sell the commodities arm. It has little grains trading experience and was attracted to AWB for the Melbourne-based group’s Landmark rural services operation.

It will use the Landmark business as its Asian base as it continues to grow its global operations.